It seems the only way for the music industry to break Apple’s iTunes monopoly is to sell music in a truly universal format; something that plays on all players. That’s exactly what Amazon has been planning to do. And now, after months of seesawing and an extended private beta test, Amazon is live with a public beta of a digital download store called AmazonMP3.

The store features more than 2,000,000 song titles, 180,000 artists and no digital rights management technology. At most, the only addition to the music will be a discrete watermark that identifies music was purchased at Amazon.

“Amazon MP3 is an all MP3, DRM-Free catalog of a a la cart music from major labels and independent labels, playable on any device, in high quality audio, at low prices,” said Bill Carr, Amazon’s VP for Digital Music.

All of the songs in the store will play on any device from iPods to Zunes, and any desktop player. Most songs will be priced at 89 or 99 cents per song, just below or comparable to standard songs sold on iTunes (but well below the premium priced iTunes Plus DRM-Free offerings). All songs are encoded at a 256kb/sec MP3 format; a higher resolution than comparably priced iTunes music. Top 100 songs will generally be priced at 89cents. Albums will sell for between 5.99 and 9.99.

The Amazon pricing models are clearly structured to undercut Apple, and at the same time seem to try and accomodate the concerns of the labels. While largely fixed, phrases in the press releases like “most are priced” hint that there is room for the kind dynamic bundling and specialty pricing the music labels have been seeking. Sale prices for new offerings or special releases could be possible.

The one glaring hiccup for Amazon is the absence of Sony BMG and Warner. The two labels rounding out the “Big 4” (which also includes Amazon partners EMI and Universal Music) have so far refused to embrace a DRM-Free model. With the Big 4 accounting for more than 80 percent of global music sales by many measurements, the absence of two of their brethren leaves a void of A-List artists and some top hits. That probably won’t be enough of a chasm to keep Amazon MP3 from becoming relevant but it could hamper or slow their growth propsects.

Still, if any music store presently on the market has a chance to compete with iTunes, Amazon MP3 is it. They’ve got name recognition, a strong brand, support from the music industry, a deep marketing budget and most importantly are not handcuffed with rights management issues. It’s easily foreseeable that, with effective marketing, Amazon MP3 could break into the top 5 list of digital distributors within 12 months (though at present a Top 5 seller only translates to just a few percentage points of market share and that isn’t saying much).

Also worth watching will be Amazon’s position relative to number two seller eMusic. eMusic’s built its market share by selling smaller label, independent, music (often not found on iTunes) in a DRM-Free format. With close to 20,000 Independent labels participating, Amazon will overlap many of eMusic’s titles. This could commoditize the market and make Amazon an effective competitor in the MP3 independent music niche too.